wx votersin ¢>-eU1 (HUN) 08:37 ae Hy mares eee Fax: for 25 2011 08:3dan P002/026 FILED Joshua Denbeaux APR. 25, Denbeaux & Denbeaux em tl 366 Kinderkamack Road Domne, 4 Uso. ‘Westwood, New Jersey 07675 7 (201) 664-8855 /Fax: (201) 666-8589 Attorneys for Defendants | SUPERIOR COURT OF NEW JERSEY | CHANCERY DIVISION: BERGEN COUNTY } DOCKET NO.: F-61880-09 2 A Civil Action Melissa Limato, Defendant ORDER This matter having come before the Court upon application of Denbeaux & Denbeaux, counsel for defendants, upon notice to all counsel, and the Court having On. considered the moving papers submitted, having heard oral argument of counsel and the Sepned~ parties; ifany, and having considered same, and for good cause shown; of m Its, on this ae, oft, 2011, hereby ORDERED, as follows: 1, Plaintiff's Motion for Summary. ‘Judgment is denied. 2 Defendnit's Notice of Cross Motion for Summary Judgmentis granted, and “the Gein is: di vithruk peepudice. 4. Acopy of the within Order shall be served on all parties within_‘] _ days of the date ofthis Order, OPPOSED UNOPPOSED oSnn voces tine HPR-ED-CUNICMUN) 08:37 P..o0a Fax: for 25 2011 08:34am 003/026, BANK OF AMERICA v. LIMATO, ET AL, \OCKET No. BI 188 RIDER TO ORDER DATED APRIL 25, 2011 Before the court is a motion filed on behalf of the plaintiff, Bank of America, NA, (BOA” or “plaintiff"), seeking summary judgment and to strike the contesting answer. A. ross-motion for summary judgment was filed by counsel for Melissa G. Limato (“Melissa”) on February 16, 2011. A reply was filed on March 11, 2011. Oral argument was entertained on March 18, 2011. The matter was continued to April 21, 2011. Plaintiff's motion is denied; defendant’s cross-motion is granted. Facts and Procedural Posture A. The note and the mortgage On July 1, 2004, Melissa and John P. Limato (“Melissa and “Jobn” when referenced individually; “defendants” when referenced jointly) executed and delivered a fixed/adjustable rate note (the “note”) in the sum. of $532,000-t0-America’s Mortgage Outsource Prograin (“America’s Mortgage”). Defendants were directed to make payments to Wells Fargo Bank, N.A. (“Wells Fargo”). The note contained two apparently separate indorsements.” One indorsement wes in blank form payable to bearer by Wells Fargo doing business as (“d/b/a”) America’s Mortgage and the other indorsement was payable to, what appeared to be, Wells Fargo. The note provided for a change from a fixed-interest rate to an adjustable interest rate. The note obligated defendants to make * atoral argument on March 18, 2011, the court permitted plaintiff's counse! to make additional submissions regarding possession of de note within ten days. Melissa's counsel then had seven days 10 respond. The court’s order seting forth the supplemental briefing schedule was on the recard only. Oral _soment continued on April 2), 2011, 2 At oral argument, plaints counsel was unable to answer the court's inquiry regarding when the indorsements were rade.x uaversime HeK-e>-cUI I(MUN) 08: 37 P08 Fax: for 25 201% 08:34an poD4/028 Re: Bank of America, NA v. Limato, et al, Docket No. BER-F-61880-09 Rider to Order Dated April 25, 2011. {initial monthly installment payments of $3,062.50 on the first of each month commencing on September 1, 2004. The initial interest charged on unpaid principal was 5.625% per ‘annum. The interest rate was scheduled to change (1) on August 1, 2014 and (2) on the first every 12 months thereafter. Before the change date, the interest rate was to be caloulated by adding two and three-quarters percentage points (2.750%) to the then current index. The “note holder” would then round the result of the addition to the nearest one-cighth of one percentage point (0.125%). The interest rate at the first change date could not be greater than 10.625% or less than 2.750%. Thereafter, the interest rate ‘would never increase or decrease on any single change date by more than two percentage ‘points (2.00096) from the rate of interest paid for the preceding 12 months. The interest rate could never be greater than 10.625%. Any unpaid amounts would be due in full on August 1, 2034. The note provided for a late charge of 5.000% for any payment not received within fifteen (15) days from the due date. To secure payment on the note, defendants simultaneously executed a mortgage (the “mortgage”) to America’s Mortgage. The mortgage directed after recordation it should be returned to Wells Fargo. Wells Fargo wes allegedly the servicer of the ‘mortgage pursuant to an agreement (the “servicing agreement”) executed on August 23, 2004 by BOA and Wells Fargo. Section 2.01 of the servicing agreement stated, Wells Fargo “does hereby sell, transfer, assign, set over and convey to [BOA}, without recourse «+ all the right, title and interest of {Wells Fargo] in and to the Mortgage Loans.” The servicing agreement defined mortgage loans as a “Mortgage Loan .... identified on the The “index” is defined under the aote as “the average weekly yield on United States treasury securities ‘adjusted to a constant maturity of one year, as made available by the Federal Reserve Board.” The “current index” is the “most recent [i]ndex figure available as of the date 43 days before each [cThange [dJate.”wx vacer tine HeR-e9-e011(NON) OB: 37 P.005 Fans for 25 2011 08:35am PO05/026 Re: Bank of America, NA v. Limato, et al. Docket No. BER-F-61880-09 Rider to Order Dated April 25. 2011 Mortgage Loan Schedule,” but the mortgage loan schedule was blank. Melissa's counsel understandably questioned the applicability of the servicing agreement to the note on the gxound the servicing agreement was executed in 2004 whereas the assignment of the note to BOA, discussed below, was executed in 2009. The mortgage was recorded July 27, 2004 in Book 13705 of Mortgages on Page 763. On November 18, 2009, America’s Mortgage assigned the mortgage and note to BOA. Wells Fargo, d/b/a America’s Mortgage “attested” to the assignment. The assignment was recorded on December 18, 2009 in Book 00317 on Page 1997.* Defendants argue there are no competent proofs plaintiff was the present holder of the note. While plaintiff stated it was the present holder pursuant to the indorsement and the assignment and certified it had actual possession of the note om the date the foreclosure complaint was filed, Melissa's counsel countered there is wo competent evidence the note was ever physically transferred to plaintiff nor is there any evidence that it had been lost. Defendants apparently executed a “truth in lending disclosure statement” (the “disclosure statement”) on July 1, 2004, acknowledging receipt of the statement, The discloswe statement conveyed the following: (1) the lender was America’s Mortgage, (@) defendants were the borrowers, (3) the property address was listed as the mortgaged premises, (4) the loan amount was $532,000, (5) the intial interest rate was 5.625%, (6) the payment schedule, (7) the loan contsined a variable rate feature, (8) security interest * Melissa's counsel disputed plaintiff's allegation America's Mortgage assigned the nots end mortgage to BOA. Specifically, counsel claimed thee was no admissible evidence proving the assignment of mortgage; snd, a5 to assignment of the note, counsel asseried en assignment of mortage did not have any effect 00 the note as a note cannot be assigned but rather must be negotiated or transferred under the UCC pursuant toNLS.A, 124:3-301. Altematively, counsel noted ihe asigament ofthe morigage transpired after the alleged default dated July 1, 2009, See below fora fuller discussion regarding the deftScotts neR-Ea-curiqnuny UB! ay P. pos Fax: for 25 2011 08:35am 006/026 Re: Bank of America, NA v. Limato, et al, Docket No. BER-F-61880-09 Rider to Order Dated April 25. 2011 was given in real property, (9) assumption of the loan by another was possible, (10) there would be no prepayment penalty or refunds of prepaid payments, and (11) hazard insurance was required.> A summary of disclosures of the annual percentage rates charged in connection with the loan (“APR" and “APR disclosure statement") prepared on October 7, 2010 by running a software program apparently made available to the public by the government, indicated the amount financed was $527,457.10; the “disclosed” estimated APR was 5.1670% and “disclosed” finance charge was $494,749.35. These figures were listed as “original” loan information. The APR disclosure statement then listed the same amount financed, but the finance charge was now listed as $494,944.67; the total of payments (Which was listed in the latter section for the first time) listed an amount of $1,022,401.77; and the APR was listed as 5.2116%, According to the APR disclosure statement, the finance charge violation was $195.32. Plaintiff disputed the APR disclosure statement on the ground it was inadmissible evidence. ‘The note contained an agreement if any installment payment should remain ‘unpaid for 30 days after the same shall fall due, the whole principal sum, with all unpeid principal and interest, should, at the option of plaintiff become immediately due and payable According to the certification of plaintiff's counsel, Anne E. Walters (“Walters” and the “Walters Cert.”), defendants defaulted under the terms and conditions of the note by failing to make monthly installment payments “as required.” The Walters Cert. failed + In edition tothe trath in lending disclosure statement of July 1, 2004, another such statement was ‘executed on May 4, 2004 and contained different variables than those contained in the July 1, 2004 statementna water tame nem-e5-culsqnuny ua: 31 Poor Fans for 25 2011 08:3Kan 007/026 Re: Bank of America, NA v, Limato, et al. Docket No. BER-F-61880-09 Rider to Order Dated April 25,2011 to specify the date of the alleged default, but stated the payments remained unpaid. Plaintiff's complaint indicated the defailt occurred oriJuly 1, 2009, and defendants failed to make any payments becoming due theréafter.® Défenidants disputed the default on the basis plaintiff failed to produce evidence in support of the ellegation; altomatively, defendants argued plaintiff was not a party entitled to enforce the note. Defendants did, however, concede they failed to make a payment under the note during the summer of 2009, specifically in or about August 2009, and presumably thereafter, B. The NOI Pursuant to the Fair Foreclosure Act, Wells Fargo mailed notice of intention to foreclose to defendants." One notice (“NOI 1”), dated February 15, 2009, was mailed to John at 522 Wellington Drive, Wyckoff, NJ (the “mortgaged premises”). A second notice (NOT 2”), dated August 30, 2009, was also mailed to John at the mortgaged premises. A third notice (“NOI 3”), datéd September 14, 2009, was mailed to Melissa at the mortgage premises. NOI’s addressed to John and to Melissa, separately, were received on September 19, 2009; certified mail receipts signed by John indicated delivery of the NOP’s was accepted. Although defendants claimed they were not served the notice of intent to foreclose, the FFA does not contain such a requirement, See N.J.S.A. 2A:50-56.? Defendants further stated none of the three notices of intent to foreclose were from the “lender” and therefore plaintiff was in violation of the FFA. © Details of the complaint are sot forth below. TNS.A.24:50-53 to :50-68 is hereinafter referred wo asthe “FFA.” ® Plaintiff certified the mail receipts were tric and correct copies. 9 “Notice of intention to take action (to foreclose) shal) be in writing, sent to the debtor by registered or certified mail, return receipt requested, at the debtor's last known address, and, if different, to the address of the property which is the subject of the residential mortgage, The notice is deemed to have been effecruated ‘on the date the notice is delivered in person or mailed to the party.” N.J.S.A. 24-50-S6(b).08 Po Fax: or 25 204% 08:36an 008/025 Re: Bank of America, NA v. Limato, et al. Docket No, BER-F-61880-09 Rider to Order Dated April 25, 2011 €. Pleadings (On November 24, 2009, a complaint for foreclosure was initiated against the defendams listing plaintiff as the party in interest, On July 20, 2010, counsel on behalf of Melissa filed an answer and counterclaim," The answer admitted execution of the note and mortgage. In response to Plaintiff's allegation of defanlt, the answer denied plaintiff had the right to enforce the note and/or mortgage and therefore lacked the right to declare the note in default; but nonpayment was conceded. The answer asserted seventeen affirmative defenses and a counterclaim alleging violation of the Truth in Lending Act (“TILA”), No other defendant filed an answer,!! Plaintiff filed an answer to the counterclaim on August 31, 2010, Ninetcen affirmative defenses to the counterclaim were listed. D. Summary judgment motions Counsel on behalf of plaintiff filed the instant motion for summary judgment.and to strike contesting answer on February 1, 2011. In support of the motion plaintiff submitted a memorandum of law and the Walters Cert.” The Walters Cert. contained the following exhibits: (1) complaint to foreclose; (2) answer, affirmative defenses, and counterclaim; (3) answer to counterclaim and affirmative defenses; (4) the note; (5) the ‘mortgage; (6) the assignment; (7) NOI 1, NOI 2, and NOI 3; (8) the cover sheet to the & At oral argument on March 18, 2011, Melissa's counsel informed the answer was filed on Melissa's behalf only 38 John is deceased. The date of death was not stated 1 Other tan Melissa John and First Horizon Home Loans were narmed defendants fo the forectosure action inthe complaint. 2 The statement of fats, as required by R,4:46-2(¢), was submited within the Waters Cert. Such a practice is disfavorednx overtime NMES“CUII(MUND USE dE P.009 Fax: for 25 2011 08:36am 008/025, Res’ Bank of America, NA v. Limato, et a. Docket No, BER-F-61880-09 Rider to Order Dated April 25. 2011 servicing agreement; and (9) the disclosure statement, Plaintiff argued it had not violated the FFA as Wells Fargo was the servicer of the loan, nor had it violated TILA as the necessary disclosures were presented. Counsel on behalf of Melissa filed on February 16, 2011 a eross-motion for summary judgment and to strike the Walters Cert.. The cross-motion consisted of a statement of material facts, a brief, and a certification of Melissa's counsel Adam Deutsch, Esq., (“Deutsch” and the “Deutsch Cert."). The aiguments were plaintiff lacked standing to foreclose, plaintiff violated the FFA and TILA, and Walters was an incompetent witness to admit the exhibits attached to the Walters Cert, ‘Counsel on bebalf of plaintiff submitted a reply on March 11, 2011. The reply consisted of a letter brief and a reply certification by Yolanda T. Williams (“Williams” and the “Williams Cert.”). Williams certified she was eiuployed by Wells Fargo Home Mortgage (“WFHIM"), a division of Wells Fargo, and was “very familiar and personally knowledgeable regarding the décuments that [were] kept in conneétion with residential mortgages.” She asserts she had personally reviewed the note and mortgage. The Williams Cert. consisted of the following exhibits: (1) the note (indorsed); (2) the mortgage, (3) the assignment, (4) NOI 2 and NOI 3, (5) tracking confirmations of NOI 2 and NOI 3, (6) two “truth in lending disclosure statements” executed prior to the truth in lending disclosure statement. Counsel argued plaintiff had standing, plaintiff was in compliance with the FRA end TILA, and the Williams Cert. and attached exhibits were admissible and rendered the argument in the cross-motion regarding admissibility moot.10 nen-es-culigmuny vo: 31 Po Fox: fer 25 2011 08:35am pON0/026 Re; Bank of America, NA v, Limaté, et al. Docket No. BER-F-61880-09 Rider to Order Dated April 25, 2011 On March 28, 2011, plaintiff's counsel filed a supplemental brief addressing the issue of possession of the note and provided a certification by Kyle N. Campbell (“Campbell” and the “Campbell Cert.”), default litigation specialist for Wells Fargo." Campbell certified he was “very familiar and personally knowledgeable regarding the documents that are kept in connection with residential mortgages.” The Campbell Cert. contained (1) the servicing agreement, (2) the retum receipt of NOI 2, and (3) the retum receipt of NOL 3, Counsel argued the Campbell Cert. demonstrated plaintiff had actnal Possession of the note on the date the foreclosure action was commenced, (On April 7, 2011, counsel for Melissa filed a reply brief addressing the issue of Possession of the note and the mortgage. Additionally, counsel submitted arguments pertaining to the competence of Williams and Campbell as witnesses, the admissibility of their certifications, and the negotiation of the note. Law A. Standing As the Honorable Stephen Skillman, .J.A.D., recently highlighted in Wells Fargo Bank, N.A.v. Ford, _ NJ. Super, __, _ (App. Div. 2011) (slip op. at 8), in New Jersey, “als a general proposition, a party secking to foreclose a mortgage must own or control the underlying debt.” Also seé Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 327-28 (Ch, Div. 2010). However, when a debt is évidenced by a negotiable instrument, ™ As indicated above, the court permitted supplemental briefs on the issue of possession. At orl argument, ‘the court esked pleintfP's counsel wry « certification was not provided by a representative of plaintiff indicating plaintlff had possession, Counsel's answered the plaintiff was satisfied the documents it provided were were sufficient ro demonstrate pleintfT had physical possession ofthe note. This vas particularly surprising a the motion was caried specifically to provide plaintiff with the oppornnity to ‘ure its deficiency regarding possession. .na vower time RRR-C>"cUN| (MUN) UB: 30 Pon Fax: for 25 2011 08:35am pO11/026, Re: Bank of America, NA v. Limato, et al. Docket No. BER-F-61880-09 fer to Order Dated Ay 2011 “Article Wl of the Uniform Commercial Code (UCC), NILS.A. 12A:3-101 -605, in particular N.LS.A, 12A:3-301,” governs. Wells Fargo Bank, N.A., supra, at *8. Under the applicable statute: “Person entitled to enforce” an instrument means [1] the holder of the instrument, [2] a nonholder in possession of the instrument who has the rights of the holder, ot [3] a person not in possession of the instrument who is entitled to enforce the instrument pursuant to [N.J.S.A.] 12A:3-309 or subsection d. of [N.J.8.A.] 12A:3-418, N.J.3.A. 12A:3-301. Under the first circumstance provided by NJS.A. 12A:3-301, a person who qualifies as “the holder of the instrument” is entitled to foreclose on 2 negotiated debt. A holder is defined as “the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession.” NIS.A. 12A:1-201. See also N.S.A, 12A:3-201(a) (A “holder” is the person who has physical possession of the negotiated instrument). In order to transfer “holder” status to a third party, a negotiation must take place whereby the transferring holder indorses the instrument and then physically transfers possession of the instrument to the transferee. N.J.S.A. 12A:3:201(b). Only once the negotiation bas occurred, will the third party become the new “holder” and be entitled to foreclose upon the debt. Ibid, Second, a person has standing to foreclose on a negotiated debt when they are “a nonbolder in possession of the instrument who has the rights of a holder.” See N.LS.A. 12A:3-301. In this scenario, the instrument is physically transferred without the indorsement of the issuer. See N.J.S.A. 12A:3-203(c). While the lack of the indorsement prevents the person with possession of the instrument from becoming a holder, thene waver seme em-co-cUti (MUN) UB! 31 Pole Fax or 25 2011 08:35am PO42/028 Re: Bank of America, NA v. Limato, et al. Docket No. BER-F-61880-09 ider to Order Dated April 25, 2011 transfer “vests in the transferee any tight of the. transferor to enforce the instrument, including any right as a holder in due course." See NLS.A, 12A;3-203(b). Under NSA, 12:43-301: A nonholder in possession of an instrument includes 2 person that acquired rights of a holder by subrogation or under Section 3-203(a). It also includes both a remitier that hes received an instrument from the issuer but hes not yet transferred or negotiated the instrument to another person and also any other person under the applicable law is a successor to the holder or otherwise acquires the holder's rights, Once the instrument's transfer has been cormpleted, the ability to enforce the unindorsed instrument can only be denied if, “if the transferee engaged in fraud or illegality affecting the instrument.” Seg NJLS.A. 12:3-203(b). Finally, stending to foreclose on a debt is obtained when a holder, who is entitled to onforce the instrument, subsequently looses physical possession of the instrument “because the instrument was destroyed, its whereabouts cannot be determined, or itis in the wrongful possession of an unknown person or @ person that cannot be found or is nat 12A:3-309(a). However, “the loss of amendable to service of process.” See N.J. ™ Under NJS.A. 1243-302, “holder in due course’ means the holder ofan instrument if (1) the instrument when issued or negotisted to the holder does not bear such epparent evidence of forgery or alteration or is not otherwise so irregular or incomplete esto ca into question its authenticity; and (2) the holder took the inswument for value, in good faith, without Aotice that the instrument is overdue or bas been dishonored or that ‘here isan uncured default with respect to payment of another instrument issued as pert ofthe same series, without notice that the ‘instrument contains an unauthorized signature or bas been altered, without novice of any claim to the instrument... and without notice that any party has a defense or claim in secoupment. Tmessence, to be holder in due course, one must take negotiable instrument for value, in good faith, and without notice of any defwult or defect. Ibid. 1013 Po Fax: for 25 2011 08:38am PO13/028 Re; Bank of America, NA v. Limato, et al, to Order Dated possession {must] not [be] the sesult of a transfer by the person or a lawful seizure.” See NJS.A. 124:3-309(a). Aside from physical loss, ifthe instrument was “paid o accepted by mistake and the payor or acceptor recovers payment or revokes acceptance, ... itis treated as dishonored, and the person from whom payment is recovered has tights as a person entitled to enforce the dishonored instrument.” See NJL$.A, 12A:3-418(d). B. Admissibility of evidence “Hearsay” is defined as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” N.JLR.E. 801(¢). “Hearsay is not admissible except as provided by [the New Jersey rales of evidence] or by other law.” NRE, 802. NRE. 803(c)(6) sets forth the business records exception to the hearsay rule: ‘A statement contained in a waiting or other record of acts, events, conditions, and subject to Rule 808, opinions or diagnoses, made at or near the time of observation by a person with actual knowledge or from information supplied by such a person, if the writing or otier record was made in the regular course of business and it was the regular practice of that business to make it, unless the sources of information or the method, purpose or circumstances of ‘preparation indicate that itis not trustworthy. NIRE, 803(6\(6). R. 1:6-6 sets forth how to place evidence before a court. “If a motion is based on facts not appearing of record or not judicially noticeable, the court may hear it on affidavits made on personal knowledge, setting forth only facts which are admissible in evidence to which the affiant is competent to testify and which may have annexed thereto certified copies of all papers or parts thereof referred to therein.” Personal knowledge, the uPeR-ES“EUNI\RUN) UBT Pola Fax: or 25 2011 08:38an pO14/026 Re: Bank of America, NA v, Limato, et al, Docket No. BER-F-61880-09 idor to Order Dated April 25, 2011 ‘mandate ofthe rule, clearly excludes facts based merely on “information and belieé” See, og. Wang v. Allstate Ins. Co,, 125 NJ, 2, 16 (1991). Affidavits by attorneys of facts not based on their personal knowledge but related to them by and within the primary knowledge of their clients constitute objectionable hearsay. See Murray v, Allstate Ins, Co., 209 N.J. Super. 163, 169 (App. Div. 1986). The requirements of the rule also are not met by affidavits containing argument, other forms of hearsay and general factual or legal conclusion. Pressler & Verniero, Current N.J. Court Rules, comment on R. 1:6-6 (2011). ‘Where hearsay is admissible under an exception to the hearsay rule which requires that, specific conditions have been satisfied, hearsay evidence camot be deemed competent unless itis first determined that those conditions have been satisfied. Jeter v. Stevenson, 284 N.J. Super. 229 (App. Div. 1995). Merely appending relevant documents to the motion brief does not constitute compliance with R. 1:6-6; such documents must be Incorporated by reference in an appropriate affidavit or certification, which properly authenticates material which is otherwise admissible. See Celino v. General Acc. Ins. 211 NJ. Super. 538 (App. Div. 1986). NALRE, 901 sets forth the rule for authentication of evidence. “The requirement of authentication or identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding that the matter is what its proponent claims.” NIRE. 901. C. Material issues in foreclosure proceeding ‘The defenses to foreclosure actions are narrow and limited. The only material issues in a foreclosure proceeding are the validity of the mortgage, the amount of 12